Dynamic Export » Marketing

Marketing lessons: whatever happened to Starbucks?

UNSW — Mon, 23 Jan 2012 01:18:01 +0000

When Paul Patterson was in a shopping centre recently and his wife announced she was keen to peruse the stores, he decided to sit it out. Instead he slipped into a Starbucks outlet, ordered a coffee, took a seat and enjoyed reading the newspaper. After an hour he felt slightly guilty about sitting there for so long, so he ordered another drink.

“They made A$6 from me during the 90 minutes that I took up a chair and table in their café,” says Patterson, a marketing professor at the Australian School of Business. “They have quite large stores and their model is that they charge a slight premium, but you can sit there for an hour on one coffee. With the rent on those premises, that business model is not sustainable. It doesn’t surprise me that they lost so much money in Australia.”

The story of Starbucks in Australia is a salutary lesson in business. It’s the tale of an organisation seeking world domination in its field that stepped into a new market without first testing the waters. What went wrong for the company down under has been analysed in a paper by Patterson and fellow marketing professor Mark Uncles with Jane Scott, also from the Australian School of Business.

When Starbucks entered the Australian market in 2000, it was one of the biggest coffee chains globally, opening one new store every day somewhere in the world, notes Patterson. Its success in the US, which had not previously enjoyed a strong coffee-drinking culture, had given the brand great confidence to enter other markets including Japan (1996) and China (1998). The company now has more than 15,000 stores in 44 territories.

But in mid 2008, Starbucks’ management announced that it would close 61 of its 84 Australian stores. The closures took place swiftly – within one month. Losses were enormous, including 685 jobs and A$143 million. Just 23 Australian stores were left operating in prime locations. What went so wrong?

Avoidable Errors

Patterson can identify several major problem areas that, in combination, caused the decline of Starbucks in Australia. They begin with the brand overestimating its points of difference, as well as the customer-perceived value of its services. After giving Starbucks a try, many Australians – who, in the majority, lived in cities with already thriving café cultures and experienced, world-class baristas – failed to understand why Starbucks charged more for its coffee.

The second serious problem was that service at Starbucks suffered as the number of stores grew at a fast pace and began employing younger, less-experienced staff.

Issue three was the mistake of failing to adjust its product to suit Australians’ coffee tastes, which lean more towards Europe. Instead the company introduced its American offering. And that helped to create the fourth glitch – a perception that the brand, due to its rapid expansion over just a few years, was forcing itself onto an unwilling public.

In contrast to Asian territories where coffee houses previously didn’t exist, in Australia Starbucks entered an extremely competitive and mature café market. Not only that, but as Starbucks did not advertise in the mass media – relying instead on its reputation – it failed to communicate its brand. “It is probably against their corporate ethos, but I would have done some above-the-line advertising to promote the brand,” Patterson suggests. “I am sure the majority of the Australian public did not know much about them.” Above-the-line advertising refers to advertisements aimed at mass audiences on platforms such as television, cinema, radio, newspapers and magazines and the internet.

Finally, Starbucks’ business model was simply unsustainable. Leasing a large, expensive shop space and inviting customers to sit around for as long as they like while spending very little was never a good idea in a highly competitive and mature market, asserts Patterson. In addition, he points out, the company owned its stores, rather than using a franchise model, which added not only to its financial pressures but also meant it lacked local knowledge.

Lessons in Decline

Business specialist Hunter Leonard, founder of Melbourne-based BlueFrog Marketing and author of the book, Marketing Has No Off Switch, says the Starbucks case offers three major business lessons. “First, research is the key to statistics,” he says. “If you don’t research then you can’t grow a business. That’s a golden rule. If you’re not surveying customers regularly then you may do well in spite of yourself, but you won’t unlock potential growth.

“The second lesson involves the importance of identifying a target market. Starbucks was going for everyone. They claimed to offer a premium coffee and therefore charged premium prices, but that did not wash with Australian coffee drinkers. They should have been targeting young people who care less about the quality of the coffee and more about the quality of the experience. They should have marketed their big, sugary coffees at people aged 14 to 25.

“Thirdly, a very valuable tip for businesses launching a new product or in a new market is to lose the ego. Just because you say you’re after global domination doesn’t mean customers will allow it … Australians react very badly to people banging their chests.”

While Patterson upholds the success of the Starbucks model elsewhere in the world and credits the company with growing the coffee category internationally, he says the brand’s major mistake was not creating any barriers to entry. “There was nothing to stop a competitor coming in and setting up against Starbucks,” he says. “I don’t necessarily mean a global chain. Look at the number of independent coffee shops around. You can just buy a high-quality coffee machine, get a trained barista on board, lease a shop and design a good atmosphere – that’s all anyone needs to do to compete. Starbucks did not create a sustainable credible advantage for themselves.”

The original advantage Starbucks did have was their level of personal service. Staff made eye contact with customers as soon as they entered the store, they remembered names of regular customers and were happy to make a drink according to specific requests. But even that advantage was easily replicable, and it was completely lost when head office began using key performance indicators to measure the sales of frontline staff. “Not only did staff have customer service targets around engaging people and ensuring customer satisfaction, but the bosses said they had to sell a certain number of coffees and cakes each day. Staff were saying they could make the sales, but they couldn’t engage the customers at the same time,” Patterson says.

According to Patterson’s report, the major takeaways from the Starbucks Australia experience are:

• Crossing international borders is risky, so in-depth research is absolutely vital.

• Think global, but act local. Even well known and well-liked brands must adapt their products for local tastes.

• Establish a differential advantage then strive to sustain it, ensuring your product is unique enough to stand out amongst its competitors, and that it always will.

• Keep sight of what first generated the business’s success. At Starbucks, sales targets destroyed the idea of high-quality service that the brand had been built upon and which was the only competitive advantage it had.

• Consider the viability of the business model. If your model relies on charging a premium price, for instance, ensure the product on offer will be recognised as premium.

This article first appeared on Knowledge@Australian School of Business website.

The channel you haven’t considered?

Kylie Hargreaves — Thu, 20 Oct 2011 22:00:34 +0000

Type in “define: eCommerce” into your Google search and the first line that might turn up is a definition from Princeton University in the US: “commerce conducted electronically (as on the internet)”.

But this doesn’t seem to go far enough these days. If you actually look at where and how people are shopping “online” you can quickly see that a more apt definition might actually be “commerce conducted via any digital means available and convenient for the consumer”.

24/7 convenience, time-efficiency, global choice, easy value-for-money comparisons, home delivery and good return policies; these are all reasons why “digital commerce” is a booming industry. They are also reasons why exporters need to think well beyond just an “eCommerce” strategy when considering their market-entry and/or marketing options.

A ‘digital strategy’ could include social media, email, sms/mms, RSS, online banner ads, digital displays and even “old” technologies like television. The best digital strategy is of course one that uses multiple techniques to “layer” the messages while also building up the database of knowledge on their customers.

Anthony Lye, President of CRM for Oracle, recently noted that businesses providing cross-channel processes and providing customers with flexibility to choose different ways to interact with the business will do far better than those trying to limit a customer to just one or two channels.

Let me give you a quick example which blends some of the various experiences I’ve had recently in the Sydney retail scene into a hypothetical scenario.

About six months ago I purchased a suit from a Sydney fashion retailer. At the time they asked if I’d like to receive a $20 voucher for my next purchase. For me to get the voucher I had to give them my email address, which I did.

They then sent me the voucher and asked if I wanted to know about their sales and if so, would I spend a few minutes filling in an online survey which would help them identify when to send messages to me. They asked if I’d like information delivered via email or a text to my phone. I opted for phone and gave them my BlackBerry number. About three weeks later I got a text message indicating this season’s suits (which matched my criteria) were going on sale in about a week. They also asked if I would I like to preview them at a special VIP sales night. I SMS-d an acceptance. At that evening, I was asked if I liked to order items online now that there was a track record in terms of my size and preferences. So I set up an online account with a full profile and I can now just order items online and have them delivered to my home or office.

In six months I have been into that store four times and bought outfits three times out of four. This from a store I’d never been into until six months ago and which I walked into just because I liked a suit I saw in their display window. So a digital strategy works nicely to build your customer base, loyalty and repeat sales. But my example still requires a physical “bricks and mortar” or “shop-front” set-up. Are there any other alternatives?

Interestingly, this is where television is making a comeback. Television retailing is big business. Thankfully, I’m not talking about cheesy, cheap infomercials peppering our favourite TV shows here, but rather actual dedicated television retail channels.

The biggest television retailer in the world is QVC. In fact, QVC is now the second largest television channel in the US after CBS – and it does nothing except sell things! In 2010 they had a turnover of almost US$8 billion. They broadcast live 24x7x364 days a year (Christmas is pre-recorded) to almost 200 million households on three continents.

They use numerous digital channels to service their customer base, including a website qvc.com and its international equivalents, as well as an integrated mobile/telephone support network. Their website gets 18 million visits from 6 million distinct visitors each month. They also have a very active community on Facebook, YouTube and Twitter.

The scale of QVC can be a bit mind-boggling when you think they delivered more than 158 million packages to their customers in 2008/09, who by the way, all recorded a 95 percent intention to re-order. That’s about seven or eight packages per annum delivered to every man, woman and child in Australia from just one business alone. One can’t even imagine that would be possible for a major Australian retailer like David Jones or Myer.

So it’s clear it’s a business model that works in the US and by the spread of QVC and competitors like it into markets like the UK, Japan, Germany and even India, it’s clear it’s a channel that works in other markets too.

If we look closely at QVC’s demographics and major product categories, you can pretty quickly see there is s natural, although evolving, focus on fast moving consumer goods. In 1998 over 50 percent of the items sold on QVC were household items. In 2008, this had changed to reflect a broader range of items but 45 percent of sales were still household items.

Contrary to popular opinion, television retailing is not the “back-water” of retail selling excess product or cheap, disposable items. QVC’s biggest movers are in fact high-end brands. QVC’s customers are predominately “above average income households”. They are however, predominately female; over 90 percent of QVC’s revenue comes from female customers aged 35-to-59. So if your product is designed for the more affluent, brand-aware and design-savvy female consumer, you might just want to look at market-entry options like QVC.

Of course, the hurdles to get selected can be significant and you have to be able to supply in large-scale quantities. It’s not uncommon for 2,000 units to be sold within minutes of a segment airing. You also need to be sure to keep your QVC airtime by delivering a regular schedule of new products, colours and seasonal items.

You need to train to present the product professionally and you need to work with QVC to set a price point that gives both parties the margins they need, while still appealing to the customer.

But there can be no doubt, if you’re selected as a television retail product for a channel like QVC and you manage to survive your first two airings, then most Australian exporters wouldn’t need to worry to much about any other channel to market!

–Kylie Hargreaves is Executive Director, International Markets and Trade, Department of Trade and Investment, Regional Infrastructure and Services (DTIRIS).

Online: www.business.nsw.gov.au

How to improve your online visibility

Kate Egan-Hirst — Tue, 28 Jun 2011 23:30:44 +0000

Businesses today are realising the importance of the internet to promote themselves, get their name out there and ultimately increase profits. However, it is not enough to simply be online. Your business actually needs to be found amongst the millions of businesses cluttering the online world.

Online visibility is what distinguishes successful internet ventures from failures and underachievers. Even companies that invest thousands of dollars in sophisticated websites struggle to connect with their target audience because they are unaware they even exist.

If you type your business name into the top three Australian search engines (Google, Bing and Yahoo!7) and your business name does not appear on the first page you need to do some serious work on improving your online visibility to help your customers find you.

Here are some methods to help you increase your exposure online.

1. Include related keywords
Search engines look at the keywords and phrases included in your website copy to assess what your site is about. You need to determine what your key words are and what words people type into a search engine when looking for a business like yours and make sure these are incorporated throughout your website.

These keywords need to be included into the page title, meta tags, page description and then repeated two or three times in the copy on the page. It is a good idea to use a different key word or phrase in each page of your site. By using a range of relevant keywords you should see an increase in traffic from search engines.

2. Update your website frequently
Search engines like websites that have fresh items, they do not like outdated static websites. Each time you add content to your site you improve the ranking of your site in the search engines.

It is a good idea to add new content to your site each week. This can be articles, industry news, customer profiles, case studies or videos about your products or services. Adding a blog to your website can help make the updating process easier. A blog not only provides fresh information but provides your visitors with an opportunity to interact with your business.

Export marketing in a new market

Kylie Hargreaves — Fri, 06 May 2011 01:19:04 +0000

Many export businesses make the mistake of focusing their business plans and efforts on creating the best product or service they can in the hope that the offering will then sell itself. Unfortunately, this is seldom true.

So what should companies do?

The short answer is to make sure that marketing is just as important an element in your business plan as your production, logistics, financial management, sales and client service elements.

The long answer is a bit more complicated. If you read the text books on this, they indicate 4-10 percent of your sales turnover should be allocated to your marketing efforts. And in this context marketing is about lead generation, its about attracting new customers to your business and keeping existing customers engaged and hopefully buying more or just more expensive options.

But if you, like most Australia exporters, are actually a small to medium sized enterprise this sort of blanket percentage allocation can be almost meaningless. Especially if you are operating in more “expensive” markets such as the United States, Europe or Japan.

Far better therefore to focus on:

* Market segmentation Who are your most probable customers, where they are located, how and what else do they currently buy, who are they influenced by and what ‘need’ are you fulfilling?

* A well-rounded program Small businesses don’t have the luxury of putting all their eggs in one basket, you need to think creatively about the many different marketing options that exist.

* A well-paced program The aim is to try to deliver your message to your target customer segment as many times as possible, given your budget. Using a variety of marketing channels, including many that are low cost or free, to frequently promote yourself is usually far more effective than doing one or two big, expensive marketing pushes.

* A measurable program Not everything can be quantified, of course, but you need to ensure you maximise the chances of knowing which techniques in your marketing mix are delivering results. So where you can, try to build in some tracking capabilities—even if it’s just to set up your Google Analytics or to ask each new customer how they heard about you.

Of course, all of the above is easier said than done. But if you want to understand and grow your customer base over time, it does need to be done. Thankfully with low cost telecommunications and the advent of the internet, it doesn’t necessarily have to be expensive. And once you understand your target segment, you can better target your marketing to reflect their needs, values, behaviours and locations.

Lessons in global branding

Adeline Teoh — Tue, 22 Feb 2011 22:00:42 +0000

Whether you’re a domestic business looking to go international or a ‘born global’ exporter, your approach to establishing your brand overseas should be the same. “There’s no magic wand you can wave, you go through the same process finding your target customers in any market,” says brand strategist Hamish Chadwick, principal of Image Substation. A brand is a perception of your business and products so you need to ensure that the images and wording you use to convey your offering supports that perception.

Importantly, there needs to be a correlation between corporate and marketing strategy. “The two need to be consulted concurrently when going into a market because when a company decides to export and the marketing team is left in the dark, that’s when messages get out of hand,” says Chadwick. “Marketing is the strongest element when going into a market because you really don’t get a second chance. As soon as your name and your product is in that market, that’s what people will be searching for, that’s what’s drawing them to the product. Be certain in your own mind first that the strategy is going to work and not going to offend or not make sense.”

Nick Scott, lecturer in international business at the University of Western Sydney, says the brand and logo has to lead the marketing strategy in conveying the identity of the product and producer to the overseas consumer. “Brands, logos and other promotional elements have the highest ‘cultural grounding’ compared with the other aspects of a firm’s international operations, that is, the culture of the foreign buyer impacts most directly on their perceptions of product quality and attractiveness, their motivations to purchase, how they evaluate goods, and so on,” he says. “Accommodating cultural variation is the key issue with brands. Exporters should check with potential overseas distributors and customers if the brand conveys the right image in that country, and indeed even makes sense.”

Branding overseas

Exporters need to determine whether the images and the marketing they’re using will be suitable for the country they’re going into, says Chadwick. “Some of the considerations are language, visual imagery that you’ve been using and some of the sales pitches that you use in Australia and whether they’re going to fit and make sense in the overseas markets. You have to treat each country individually. You can’t say ‘we’re going into Asia’: whether it’s China or Japan or Korea, you can’t group them as ‘Asia’ because they have their cultural nuances.”

Be careful in countries that use ideographic writing forms—such as Chinese characters—as they are troublesome to translate into, notes Scott, and for other alphabets like Cyrillic you may need a professional translator unless you are fluent in the language. Check for historical associations to words that may reflect badly on your existing brand name, he adds, or if it’s close to something unsavoury: “For example, Toyota’s MR2 sports car spoken in French sounds like ‘merde’ so they changed it for Francophone markets.” Certain numbers and colours may also have positive or negative connotations.

“Get on the ground and do some research or get some branding experts in those countries to do some groundwork on how these messages are going to be perceived,” says Chadwick. “Those perceptions will correlate as to whether people will be successful in that market.”

Women in export: Icecraft International

Gillian Samuel — Thu, 20 Jan 2011 23:23:12 +0000

“I’m 71 but I feel the same as I did when I was 20,” says Vivienne Lipke, CEO and co-founder of Queensland’s Icecraft International. Icecraft is a 2010 Australian Export Hero that sells ice sculpture moulds in 117 countries around the world.

Lipke works a 19-hour day and has only started using an answering machine between midnight and 5am because her kids insisted on it.

“I always start by 5am otherwise I’d miss my Americans, who will be going home in the next hour or two, then right across the world and into the Middle East in the afternoon, then into Europe and the UK until late at night, and you must work with their hours or you just couldn’t operate.”

Personalised customer service is what Lipke, who takes care of marketing for the family run company, believes is the key to Icecraft’s success.

That and mould making technology that took five years to develop and so far has not been successfully replicated. Lipke’s husband Cec ploughed everything he and Viv had made in 28 years of running their own businesses into buying the 10 acres of land for the mould making plant.

Using trial and error he created rubber moulds in fibreglass casing that allow for expansion as the ice freezes without developing fractures in weight bearing areas like swan’s necks, cherub’s wings, polar bear paws or dragon’s tails.

“There are about six features in our moulds that guarantee that will never happen,” Lipke asserts, and numerous testamonials on Icecraft’s website back her up. But 23 years ago, before the internet, prospective customers had to make a leap of faith when ordering the moulds sight unseen and paying for them upfront.

“It was just long hours and responding to every single inquiry and really looking after them,” she says. “We called them in their hours, explained it thoroughly and got their confidence.”

More than that, Lipke is the mistress of putting together a deal that appeals, especially in these tough times post GFC and with the rising dollar. “You have to know the answer to every question about every design, from any country to different end users. When it comes to closing a sale it all depends on the bottom line and how much you can give them, how much the freight costs, how long it will take. It’s very complex.”

Learning curve

When the Lipkes launched Cec’s invention as an alternative for caterers to handcarved ice sculptures it generated enough local interest to get coverage on television and create local demand. Soon they were getting inquiries from overseas so they started advertising in the classified sections of some international catering magazines. The United States market was one of their earliest and now accounts for 95 percent of Icecraft’s business.

It wasn’t all smooth sailing. “It cost a six figure sum to put the patents in place when really we should have spent that money on advertising. That was a lesson learned,” Lipke says philosophically. In spite of their unique product, there were other challenges to contend with.

Although Icecraft sells to 59 hotel chains this spread has not been generated by word of mouth. Chefs are a secretive lot when it comes to trade secrets. “We sold to almost every Sheraton in Australia but none of them had heard from another. We’re very grateful that chefs do move around the world, so gradually the word does get out, but in the beginning I think that it was just our advertisements and the fact that the moulds are totally reusable and we kept diversifying, but thinking back I have no idea how we developed as far as we did before computers,” she says.

Young exporters’ foldable thongs

Jennifer Blake — Sun, 16 Jan 2011 21:25:30 +0000

Business partners Ben Lipschitz and Rick Munitz are a lawyer and an industrial designer brought together by a quest to revolutionise women’s footwear.

Focusing on comfort and convenience, the 26-year-old entrepreneurs have invented a pair of thongs that triple-fold into a carry-anywhere pouch.

“I had this idea, having seen a few girls walking around in sky-high heels, that maybe something small, portable and comfortable that still looked good could be created as a take-anywhere accessory,” Lipschitz says.

Lipschitz invested his savings in the start-up with his design graduate friend Munitz at the beginning of 2009. The pair spent six months in research and product development.

Having never designed shoes before, Munitz spoke to podiatrists and shoe manufacturers, investigating different materials. “It was quite difficult having something that folded up but still had the rigidity for protecting your foot,” Munitz explains.

Each new design needed a prototype, which took four hours to make, “just so you could walk in it for 10 metres to see how it worked!”

Soon they had a prototype that worked and they hit the club scene to gauge reaction to their idea, then sought out manufacturers offshore and refined the design until they knew they had a saleable product.

From there, Lipschitz explains, “We needed a branding strategy, a good website and also an awareness campaign.” After working with experts in each of those fields Lipschitz and Munitz launched Flipsters in October 2009.

A targeted PR campaign generated enough interest to get Flipsters stocked in 120 Australian retailers in their first year. The first article was picked up by Reuters and circulated around the world and, as emails flooded in, the world of export opened up.

“We didn’t know if it was too soon. But once people start knocking on your door you have to entertain the idea that you can export,” Lipschitz says. The pair entered into cautious negotiations with distributors in several countries. “We made sure that we weren’t putting ourselves at too much risk.”

Now exporting to Ireland and Canada, the entrepreneurs hope Flipsters will be a hit in many different markets. “We’d like everyone to share in the fruits of what we’ve created,” Munitz says proudly.

Their strategy is to take it slow and not over-extend their reach. “We’re keeping it reactive because we’re still so young. We don’t want to bite off more than we can chew. America is a country that can make or break you and while it’s definitely our number one goal market we won’t enter until we’re ready, we can afford to financially back any orders. And we’d need excellent production to ensure we can churn out everything that might come from having a good relationship with America,” Lipschitz says.

Both men confess to having no idea what women want. But this forced them to research everything, and they agree this has resulted in a better product.

“It’s versatile, it’s waterproof, you can use it at the beach, for travel, after pedicures,” Lipschitz says. These features and the unique design are what they hope will differentiate Flipsters from competitor folding ballet flats.

With a price point of just $29.95 a pair, Lipschitz knew that securing high volume distribution would be vital to cashflow and is pleased with how quickly Flipsters landed in stores.

And while the last year might sound like a dream, Lipschitz is quick to credit painstaking research to their early success. “When we’re uncertain, the thing that has saved us is a lot of research. That is what has given us the confidence to move forward in a particular direction.”

For export, Lipshitz says it’s just the beginning. “It’s really cool when you get an email from overseas from someone in a completely different market who is saying, ‘Hi, I want your product here.’ It’s so exciting.”

Export market research

Lisa Goodhand — Wed, 12 Jan 2011 21:26:38 +0000

Exporters thinking of entering an overseas market need to do their homework. Everything from product packaging to the way it is distributed should be decided in advance, based on reliable information that has been systematically gathered and analysed through a uniform approach. In other words, market research.

Otherwise there is no guarantee that a would-be exporter will find a market, let alone make a profit. Research is crucial to formulating key decisions about which markets to approach and how.

“The big picture is turnkey from A to B,” says Lisa Goodhand, Director of China Operations with China Blueprint, a Sydney consultancy. “How do I get my products from Australia to a country like China, what are the government regulations, the legal infrastructure that supports importing my products and what are the implications, how do I communicate with consumers and understand the market for the product and what it looks like through the consumer’s eyes?”

The downside is that obtaining this information takes time and often money. “It’s going to take from 12 to 18 months to go from nowhere to in-market and many companies either haven’t got the patience or the money or stamina to keep going that long before they get a sale,” adds China Blueprint’s principal David Thomas.

He says that culturally Australian businesses tend to think small: “You get your product in the market, get some cash flow going, keep your stock low, start with a small operation and build up. The problem is that in China none of those things are respected. They want you to be big.”

The lesson? Find out as much about the intended market before entry because how you enter is as important to business success as the product itself.

“Market research has to be part of an overall operational plan,” says Austrade’s Queensland state manager Cheryl Stanilewicz. “Intending exporters need to sit down and work out what the cost benefit will be to them. We always encourage clients to think about how they want to build their business, how an international export strategy will help them do that and how it needs to be sustainable.”

She recommends would-be exporters view gathering information as a step by step process. “You develop a shortlist of markets and create a structured search outline in terms of demographics and markets, then drill down as much as you can to identify opportunities and trends in that particular industry for your product or service,” she says.

On your own

A lot of general information can be gathered from the internet. Stanilewicz says Austrade suggests clients search online for basic data regarding import duties, regulations, distribution channels, market size and growth, citing CIA – The World Factbook as a good souce for information on market size and demographics.

But both Stanilewicz and China Blueprint warn not to rely overly on the internet as a source. “You’ve got to be able to differentiate between what is propaganda, what’s sales and marketing, what’s people with their own agenda,” Goodhand says, and Stanilewicz too advises caution, especially when contacting potential buyers.

Creating customer value

Steve Dowling — Mon, 20 Dec 2010 04:16:54 +0000

A value proposition is just one way of communicating how a business differs from the competition. When considering a business value proposition, a good place to start is to think about what is in it for the customer, what benefit will be derived from them using the product or service being offered?

Often, businesses confuse value propositions with words of ‘high quality’, ‘satisfaction’, ‘great customer service’, ‘lowest prices’. These are just general statements that anyone can use; there is no credibility in these statements because there is no uniqueness. The best outcome is achieved when the statements used enable the business to be perceived as something unique in the market and something unique in the eyes of any potential customer.

FedEx saw an opportunity to deliver packages in a speedier manner by owning their own aeroplanes, which enabled them to be able to ship and deliver items in accordance with the customers schedule and not the schedule of the passenger airlines. They came up with the ‘When you absolutely positively have to have it overnight’ slogan to express this value and differentiate themselves. The customers did not really care that FedEx had their own planes; all they wanted was the benefit of having their packages delivered overnight to the recipients’ door. This is one example of how a business created a value proposition.

Why would a business want to create a value proposition anyway? It communicates the main advantage over the competition. It communicates why potential customers should choose it. The key aspect of any value proposition is that it must be measurable and it must be beneficial. Thinking about FedEx’s value proposition again and in particular the use of the word ‘overnight’. They have a unique benefit and they can deliver on that. The best value proposition is specific, concise, measurable and conveys a definitive customer benefit.

Deciding what a business represents up front not only establishes value externally but can also create the direction for the entire business to focus on striving to achieve day-in day-out. One approach to developing a value proposition is to ask ourselves the following questions:

What do our target customers want?
What can we offer to achieve that?
In what way is it better than the competition?

By identifying three things that represent the brand in this manner will result in identifying what is natural, what is independent and maybe even quirky. Everything that follows has to be consistent with these characteristics. Remember, a value proposition is about your customer and the benefits provided to them. And all important is that whatever we come up with, we must be sure we can deliver on. Finally, making sure that everyone connected with and working in your entire company knows and understands your value proposition and is able to act upon it supports the proposition internally.

Like the business environment we operate in, a value proposition is dynamic and therefore it is never too late to adjust it. Take a moment to reflect on your value proposition.

Five steps to export readiness

Jennifer Blake — Sun, 12 Dec 2010 23:03:06 +0000

“Take advantage of opportunities but be less opportunistic,” says Anthony Moss, director of export specialists Incite Management Group. He says that for many businesses the move into export is born out of opportunism: answering an unsolicited email or cold call from an overseas buyer.

The limits of the Australian market often tempt business owners to take up the opportunity and they begin exporting without taking time for preparation. But if the move doesn’t fit into a company’s overall growth strategy, the venture could fail, Moss says.

Planning in advance

Start research and planning long before the first container leaves Australian waters, and an exporting venture is far more likely to succeed. “You need to go through the planning exercise to determine what markets [to enter], what unique selling points [you have], what your market entry strategy is and the implications of that financially: the deflection of resources, time and energy,” Moss says.

When approached by a client eager to export, an Incite strategist will first ask why they want to export. They need to know the export venture is part of a clear, focused business strategy. “If you’ve already done the planning exercise, then it’s remarkably positive and hugely rewarding to launch into export markets,” Moss says.

Picking your market

Moss will always recommend that a business should export to New Zealand first, as a test market. “It’s a safe local, relatively small market, but it exposes them as an organisation to all of the issues that they will face when approaching other export markets. These are: time zone, currency and regulatory differences, communications and, to a certain degree, culture,” he says.

If the test is successful and the company demonstrates they have the infrastructure to support an export program, the next step is to identify target markets. While many Australian businesses approach English-speaking markets—the United States and the United Kingdom—they are not necessarily the best markets for Australian product. Moss suggests you consider more than common language when choosing markets and instead assess the appropriateness of your product or service to your target.

Exportise advisor Gary Cronin recommends that after identifying a market you seek a suitable local partner. “It could be a distributor, a company who is already distributing a similar product, someone who will help you find distributors or someone you can license intellectual property to. That partner becomes quite important to assist you in the market you’re targeting.”

Austrade should be the first point of contact, Cronin advises, as they can assist with initial market research and introduce you to potential partners.

Asia and the Middle East have proved successful markets for Australian products and services but in these markets the nature of your product or service is secondary to your ability to form business relationships, Moss says.